According to the Wall Street Journal, Apple (neé Apple
Computer) "is the most valuable company" in the world. On the heels
of its quarterly report last week, stock in Apple reached nearly $620 per share
before settling back to end the week at $602.
The WSJ reported that Apple "posted a 94% profit
jump to $11.6 billion and a 58.9% revenue increase to $39.2 billion."
This is not a stock picking column, and that is about
everything I know about the stock market, but I wanted to tell you that so that
what follows made more sense.
The New York Times published a long piece looking at how
Apple cleverly, but legally, has built a tax strategy that saves it billions of
dollars.
The Times reported that "the company paid cash taxes
of $3.3 billion around the world on its reported profits of $34.2 billion last
year, a tax rate of 9.8 percent."
"By comparison, Wal-Mart last year paid worldwide
cash taxes of $5.9 billion on its booked profits of $24.4 billion, a tax rate
of 24 percent, which is about average for non-tech companies."
Apple fired off a response over the weekend stating it
"pays an enormous amount of taxes which help our local, state and federal
governments. In the first half of fiscal year 2012 our U.S. operations have
generated almost $5 billion in federal and state income taxes."
The Times said one of the strategies Apple (and other
companies that have copied) is called - this is true - a "Double Irish
With a Dutch Sandwich," which, according to writers Charles Duhigg and David
Kocieniewski, "reduces taxes by routing profits through Irish subsidiaries
and the Netherlands and then to the Caribbean."
Apple, in its response pointed to jobs (not Steve):
"By focusing on innovation, we've created entirely
new products and industries, and more than 500,000 jobs for U.S. workers - from
the people who create components for our products to the people who deliver
them to our customers."
That is an important point. Apple has decided to begin
paying a dividend which means it will be sending at least some of the money it
is not paying in taxes to its shareholders (who will pay taxes on their
dividends).
It also means Apple has more money to continue innovating
and investing in new technologies and new products which means people like me
can choose to buy one or more of them on the theory that they will make me more
efficient, thus generating more revenue and paying more taxes.
Just about a year ago the NY Times ran a story about how
GE deals with its taxes - very similar to the one they published last weekend
about Apple. According to its quarterly report, GE's first quarter earnings for
2012 were $3.03 billion on revenues of $35.2 billion. GE didn't pay any federal
corporate taxes last year and it would not surprise me if they paid about the
same amount this year.
GE employs 287,000 people worldwide. I couldn't find a
number for U.S. employment. But each of those people pays taxes and each of the
shareholders, like Apple investors, pays taxes on their dividends and on any
profits on sale of GE stock.
All raising taxes on corporations will accomplish would
be to make more companies move more operations out of the U.S. Don't believe
me?
Let's go back to the Times piece on Apple which begins
with an explanation of its dateline: Reno, Nevada.
"With a handful of employees in a small office here
in Reno, Apple has done something central to its corporate strategy: it has
avoided millions of dollars in taxes in California and 20 other states."
California, you see, has a corporate tax rate of 8.84
percent. Nevada's corporate tax rate is … zero.
Let's assume you had the power to make major, successful
corporations pay more taxes and you used that power.
How many jobs would GE or Apple paying higher taxes
create? How many more students would go to college? How many more houses would
be bought? How much would gasoline prices go down?
Nada, would be my guess.
If anything, jobs (and the income that goes with them)
would move according to the rules of a Double Irish With a Dutch Sandwich.
None of which includes the United States.
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